Khong Guan has released its FY17 results:
http://infopub.sgx.com/FileOpen/KGL31Jul...eID=472309
1) In recent years, the performance of the trading operations -- Tong Guan Food Products Sdn Bhd and Swee Hin Chan Co Sdn Bhd -- has gone from slightly profitable to loss. Khong Guan has been surviving on the prosperity of its 30% associate United Malayan Flour.
Net profit from UMF vs Group net profit:
FY2011: $2.6m vs $4.5m
FY2012: $1.8m vs $2.3m
FY2013: $1.4m vs $2m
FY2014: $1.2m vs $1.3m
FY2015: $1.5m vs $1.2m
FY2016: $1.6m vs $0.06m
FY2017: $1.8m vs $1.2m
Interested Persons Transactions shows Khong Guan spending $11.6m to buy inventories from UMF. UMF's FY16 revenue is $94m. So it is not a case where UMF's profitability is largely dependent on Khong Guan; only about 12% to be precise.
2) Perhaps in trying to move away from the low returns of its old economy business, Khong Guan decided to make fast money from trading securities. But unfortunately, its results show it is no Berkshire Hathaway. Over a 7 year period, operating losses totaled $3.05m. Amount held in short-term investments on the B/S shrank from $10.4m in 2011 to $5.8m in 2017.
Operating profit from investment trading:
FY11: $0.23m
FY12: -$1.09m
FY13: $0.23m
FY14: -$0.44m
FY15: -$1.26m
FY16: -$1.06m
FY17: $0.34m
3) Its 2 MacTaggart Road heritage building, which is being redeveloped into a 7 storey industrial building, will take perhaps a few more months before it is completed and ready to be leased. It was valued in 2014 at $12.5m. Since it is a heritage building, for it to be sold to a third party could be unlikely, since there will be restrictions to redevelopment.
The market says Khong Guan is worth some $51m. I think better bang for your buck could be found elsewhere.